We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.
A. Pascucci, S. Pagliarani (2012). Analytical approximation of the transition density in a local volatility model. CENTRAL EUROPEAN JOURNAL OF MATHEMATICS, 10-1, 250-270 [10.2478/s11533-011-0115-y].
Analytical approximation of the transition density in a local volatility model
PASCUCCI, ANDREA;S. Pagliarani
2012
Abstract
We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.File in questo prodotto:
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